splitting stocks?

Question

is splitting a security looked at, as a positive outlook of performance or negative to stimulate trading.

Answer 1

Depends on the company and how often the company splits.

In general, it's looked upon favorably, because you're splitting due to your stock price increasing to a certain point. Thus, by splitting, you're making the stock price a bit lower to allow investors to buy more shares.

But if you split too many times, too often, then this can be viewed as negative because perhaps management is now more concerned with playing with their stock price rather than managing the company.

However, overall, companies that split are viewed as positive. Many will get to their presplit price within 18 months of their split!

Hope that helps!

Answer 2

Splitting is psychological and in itself does not make shares more valuable or easier to buy. Shares may continue to go up because (generally) stocks that have split are moving up already.

As a general rule then: A stock split is looked upon as favorable by some, but does not in itself mean it will go higher. I look at stock splits as interesting..... but never enough to even consider buying the shares.

Watch out for claims like: ...Many will get to their presplit price within 18 months of their split!

If this was true........ everyone would be following stock splits like hawks. As a general rule it's only the consumer novice that finds stock splits of value. The idea that making it easier for them to buy shares will influence the stock price (over time) is ridiculous.

Answer 3

Splitting stock is a Cultural train prevelent in advanced markets like US. This is to create liquidity for your stock. If your stock crosses 200 mark the liquidity tend to fall. If you split 1:10 then at 20 lot of investors can afford it. Lower range prices are more marketable. It can sometimes help in improving the Market capitalization which probably is not the ultimate strategy in advanced markets. Abnormally performing stocks can split and you will create lot of liquidity and market capitalisation improvement good for the CEO. Look at American companies, you can see that initially $10 issues par are now aroud 1c par or less and note how many times they might have split to reach that level.

Answer 4

Splitting changes nothing.
In real terms.
BUT
We want to buy our lots of 100 xyz.
So, if the price is less, more people (who aren't the kind of fools who would buy ONE MEASLY SHARE of something) can buy it.
And I guess that's it.
Personally, I would look at it as a way to stimulate trading.
I would also look at it like pollination (is that the right term?)
I would not disregard a stock trading at 5000000 a share as a poor value investment.
But since I don't have that kind of scratch, I probably also would not buy it. SO, lots of myself and people like myself, who are fine investors in our own rights, would not be too excited by any bloated stock that results from the prudence of even the finest investor.
Because that's not going to make returns for me. If it would, I'd buy the index.
The value of a splittling security does not change, but the number of people who can buy it in lots of 100 does.